Interest rates dip as investors seek safety

NEW YORK 
Interests rates dipped Monday in the bond market as fresh worries about Europe's economy led investors to buy up Treasurys.

Traders remain skittish about the strength of Europe's economy, particularly now after Spain was forced to bailout regional bank Cajasur over the weekend. That renewed worries that the continent's economy could falter under mounting debt and slow a global recovery.

With investors still unsure about the pace and size of a rebound, they continued their recent trend of parking money in Treasurys.

The yield on the 10-year Treasury note, which is often used as a benchmark for consumer loans, fell to 3.22 percent from 3.24 percent late Friday.

Its price, which moves in the opposite direction as the yield, rose 25 cents to $102.40625 in afternoon trading. The price of the 10-year Treasury maturing in May 2020 had risen as high as $102.84375 early in the day as major stock indexes retreated.

Stocks have pared their losses and traded in a narrow range, pulling some demand away from bonds. Stocks and bonds often trade in opposite directions.

Treasury prices have soared, sending yields and interest rates sharply lower, in recent weeks because of caution over Europe's debt crisis. There are worries that severe budget cuts needed in countries like Greece, Spain and Portugal will upend a recovery in Europe. That, in turn, could slow demand globally.

The yield on the 10-year note climbed as high as 4.02 percent in early April when investors were squarely focused on steady signs of growth in the domestic economy.

The euro, which has been viewed as a proxy for confidence in Europe's economy, fell again Monday and remains near a four-year low.

The rise in prices and subsequent drop in yields comes ahead of a busy week of auctions. The government is selling $113 billion combined in two-, five- and seven-year notes throughout the week.

Typically Treasury prices fall before an auction because it allows investors to get a better yield on the new debt. But, investor worry about Europe has superseded more normal trading patterns in recent weeks.

In other trading, the yield on the 2-year note that matures in April 2012 rose to 0.77 percent from 0.76 percent. Its price was unchanged at to $100.4375.

The yield on the 30-year Treasury bond maturing in May 2040 fell to 4.09 percent from 4.10 percent. Its price rose 21.875 cents to $104.84375.

The yield on the three-month Treasury bill maturing on Aug. 19 remained rose to 0.16 percent from 0.15 percent.